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tv   Fast Money Halftime Report  CNBC  January 15, 2015 12:00pm-1:01pm EST

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few would have guessed here. >> stunning. by the way even though the range for the dow has been about 185 points the narrowest of the year, gives you a sense of how volatile things have been since january 1st. does it for "squawk alley." over to headquarters, melissa lee and the half. welcome to the "halftime report." i'm melissa lee in for scott. we are focused on the bomb shell abroad moves markets. the swiss bank shocking investors letting its currency soar. coming up in less than 15 minutes a can't miss interview with imf chief christine lagarde. steve liesman will ask her about the swiss move, health of europe, terror attack in pairs ris and more. it is an exclusive you will only see here on cnbc. so far, the follow through in the u.s. market is mixed. we have a down market across the board with the nasdaq suffering the most losses down by about 0.7% i should say, the s&p and
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the dow down just a fraction, but keep in mind the real reaction in the currency markets, those reactions sharp and swift. sara joins us with a look at what's moving right now. >> all through lly -- truly historic day. first on the market action the euro swiss has to be your chart of the day, now only down 14%, after being down as much as 30%. a weak euro and a strong swiss franc after what the swiss national bank did, shocking the markets and saying forget it with the peg of the 1.20 that has been the place about 3 1/2 years to keep the swiss franc from getting too strong it's just getting too expensive and too difficult to do. that was a huge sign that ecb could come up next with qe and it would get out of control for the swiss to have to defend this currency. that's why there's so many implications for this. beyond just that, watching the euro vers sus the u.s. dollar today. also weakening sharply, this is
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only going to accelerate the euro's move lower and dollar stronger because the swiss were key buyers of the euro helping to keep it up. now that that's out i would not want to be an exporters in switzerland. another big implication, nestle or multinational, that swiss franc is getting stronger. it hurts u.s. exporters with the dollar getting stronger if you're a general motors or a mcdonald's or a coca-cola. those are some of the key implications. as far as the markets overall, volatility, clearly already a theme in 2015. the name of the game with the potential for central banks to shock like this. literally no warning. nobody expected this. you can bet that this is going to keep markets on edge as we've seen the mixed reaction here in the united states. who will surprise the markets next? could be the u.s. is a safe haven in this global policy storm, the russian to u.s. assets we've begun to see. >> thanks for breaking down the move for us. it's interesting to read the
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wall street research and it's words like seismic, like surprised, from a stoic swiss national bank, michele. i mean this just caught everybody off guard, especially in a currency market which has seen volatility that has been unprecedented. >> and then this just was off the charts. dare we call this a teaching moment? about the implication of what currency can do. show you two charts. novartis, priced in swiss francs and what it did today, it got hammered. right? but look at novartis' adrs priced in u.s. dollars in the united states. if you were a u.s. investor who bought novartis you're doing better. why? because the currency appreciated so dramatically today. you won on the currency side. remember, you can get hammered on the other side as we see people who bought euro stocks based in euros and what have we seen the euro do, nothing but decline. sometimes you still lost because the currency has gone down.
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>> sara, i think you're there, what's the implication, because the swiss franc has been a favorite in terms of the trade, so now that we see this move in the sharp reaction in the franc what happens to that and the unwinding of that trade? >> well, it could get stronger, the swiss franc. just in time for java. enjoy your $15 chocolate bars if you're going over there. but seriously the swiss franc has been kept art fiblly weak by the central bank. now it's stepping out of the market and allowing it to get stronger, especially if we see qe monetary stimulus from the ecb as early as next week at the policy meeting the swiss franc could strengthen more. that's why those companies that michele showed you is really where the fallout is going to be felt the hardest. >> what are the implications to equity investors? stephanie link? >> well, i think that we're all watching what the ecb does next week and i think the actions from the swiss central bank is clearly they see something coming down the pike that could be the big bazooka we've all
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been talking about and so longer term, i think that that's a good thing for the european markets. really to stem this deflationary spiral that we're on. i think -- we've been bullish on the u.s., but i think it's time to start to pick a little bit at europe if you expect that the monetary policies are going to be that big, that they're going to be that impactful and you can own a couple names in the european markets get on valuation and the expectation you will see the trade. >> for me the most important thing the continued volatility especially what we experienced overnight, it makes me want to pause and do less, not more. that's the strategy i've had in 2015. i think you look at the move in the oil market, the move in the oil market today, reminds me of the move in equities on tuesday when equities were up 300 plus, same thing this morning for oil being up 2.25 plus. i think it's an ominous sign the way oil has reversed today and what's getting lost in the
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message today is that the u.s. 10-year treasury is 1.78. that is unbelievable. and i think that's indicative that the world is reaching for the safety of the u.s. treasury. >> massive dislocation, right? we are in unprecedented financial times and this is systemic of other things we might see. expect more big dislocation. oil, treasuries, the swiss franc, what else is throughout. >> the implication, i bet a lot of people out there caught on the wrong side of the trade an we're not going to see the implications of that for potentially weeks. >> because we talk about the thinnest of the trade right now and with that also adds to the volatility we're seeing not just in the equity markets you can see it in the volatility index itself. last two days, 1765 towards 23.5, that's extreme volatility. the ovx last week hit a three-year multiyear high of 59. today moving around again it was up 5.5% earlier, pulled off a little bit. when you look at it global evepss, look at russia, india, all over the world right now, look at the economic when
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talking about the central bank moves as well, this all affecting. look at gold and the way the gold stocks these miners are trading. that's been sort of not talked about, but look at these miners each and every day and a lot of option activity as well. >> you could day trade this market given the volatility these guys have talked about or just kind of pick your spots, quality names, great balance sheets, great franchises and when the markets do -- when our markets get hit because of what's going on in europe and in the rest of the world, and our 10-year and confusion and oil price and all that you pick your spots. we raised cash in january ahead of earnings season for that very reason and now we're getting these days like yesterday where you can actually pick at some of the quality names. >> you bought unileaver. >> we did. >> thanks to sara eisen and michele caruso-cabrera on set. we have an exclusive with christine lagarde chief of the imf, we'll ask her about what has happened in switzerland for the implications of europe and
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the u.s. dominic chu joins us with that story, dom. >> melissa, prior to today the dow had seen a huge amount of movement, a roller coaster ride. you can see here we put it up graphically how far we've come. if you measure by the ups and downs throughout the course of the intraday trades we've marched up and down by about -- it's a lot, 3,000 steps right now, 3,000 points overall for the dow jones industrial average. so a lot of volatility just entering today. today we've already seen more of that concluded. -- included. if you look at the financials where we've seen more action because it's been earnings season for them. see just for a year to date we're down about 6% for the index driven a lot by these micro economic or company specific stories. take a look at what's been happening here. fixed income trading, legal costs have been a focus for a lot of bank investors out there. bank of america, jpmorgan chase, citigroup reporting perhaps expected large declines in fixed income trading revenues over the course of this past quarter, compared to the same time last year.
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so big moves here. and if you look at the earnings calendar examining up, of course, we got the big ones, goldman sachs and morgan stanley still to report. goldman sachs on friday and then on tuesday after the holiday morgan stanley, guys. back over to you. >> thanks for that. pete najarian you bought jpmorgan calls. >> i did yesterday. yep. >> yesterday. >> what do you do here? across the board there's weakness. >> there is weakness but what was the strongest part of jpmorgan's was actually the investment banking revenue up 31%. goldman sachs tomorrow i expect a big number. i put calls in there as well. >> goldman sachs has a lot of trading. >> they do. >> trading has been the problems for the banks that have reported. >> equity trading was up 25% at jpmorgan as well. so it was really the fixed income that was their one down spot along with obviously what everybody focused on which is the legal issues. >> i think the capital levels and credit metrics were a little bit on the margin disappointing in addition to fic, but fic down 20, 30% at these companies year over year.
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stunning. we expected declines but not to this level. i think that, you know, i think goldman is going to outperform. i think morgan stanley is going to outperform and want to be selective in banks. >> i think there's two things you should look at if you work with an ador and an ability to buy bond offerings of these financial institutions i would do it as they build cash that's a better trade than opening the equity. the consumer finance names you're long american express, private sector borrowing costs continue to go lower, the u.s. heals itself and we're the best economy clearly globally that's evident right now, whether discover, capital one or american express i like those names. >> coming up don't miss our interview with imf managing director christine lagarde. we reaction to the global turmoil and her 2015 outlook. halftime will be right back.
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welcome back. moments away from the exclusive interviewer with imf manager christine lagarde. meantime with all the turmoil abroad is your best strategy to stick with u.s. centric stocks. brian runs small and mid cap at wells fargo named a rising star by fund industrial intelligence. great to have you with us. >> thank you for having me. >> what's your outlook? what's the draw to small caps as we go into this tremendous period of volatility and might see the dollar bull run come to an end?
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>> volatility has picked up. today we're cautious than we've been in a long time keeping powder dry for better opportunities. the perspective is influenced by our efforts to always quantify the risks to owning equities. what we're finding through that lens is that the market is mispricing the downside of risk into the more volatile areas of the marketplace. today we're favoring comes that have higher visibility of the revenue treatment, recurring revenue and better balance sheets, like staples, health care and technology. >> let's drill down and talk about your specific picks. what's your top pick going into 2015? >> one of the names in health care is centin in the medicaid managed care space. pure play 234 that space. medicaid is one of the areas where through the affordable care ax and budget issues at the state level more individuals are pushed into that group and they've done a great job picking up share there and they have
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about $100 billion plus of potential backlog they could win and a share with other players. high visibility to the revenue growth and a very good company that's well run in the right space for us. >> you like dst. where we are in them selling their noncore assets and are you concerned about customer concentration. >> organic growth across the board in financial services and health care sectors, where they play. they are probably third or fourth inning in the liquidation of over a billion dollar of assets in private equity, public equities and real estate. that billion dollars will be used over time to tuck in more -- tuck in acquisitions for organic growth and bigger buybacks and support of the dividend. the stock is relatively cheap compared to what we see as a potential upside. >> going to leave it there. thanks for your time. bryant, of wells fargo. >> coming up do not miss our interview with imf managing
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director christine lagarde. her reaction to the turmoil and shocking news out of the swiss national bank today and 2015 outlook. stay tuned. the halftime report, with scott wapner, is the place for market moving interviews. >> when you see large currency moves and large priced moves in a commodity like oil you have to be worried. >> real money. >> what makes things cheap is uncertainty. >> real debates. >> my bet is you should by every canadian oil stock there is. >> the most profitable hour of the trading day. >> do you think dick costolo will leave that job. >> we think there's a good chance he's not there within a year. >> the "halftime report" weekdays at noon eastern.
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pull back for the markets. s&p down by 0.6%, nasdaq down 0.9%. the downgrade of apple weighing on that index with apple down 2.4%. the analyst behind that call coming up. kris fei christine lagarde is live in d.c. with an exclusively interview. take it away. >> thanks very much. i'm here with the managing director christine lagarde, only said to be very interesting times.
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thank you for joining us, madam lagarde. >> pleasure. >> i have to ask about the news this morning. the swiss national bank lifting the floor getting rid of the floor on the swiss franc. is that the right way to do policy? a surprise action by a central bank that rocks markets globally? >> well, clearly what is needed is cooperation, collaboration, communication, i've advocated that and the imf is strongly supporting frens p, for instance, the policy of janet yellen who is communicating very clearly. this was a bit of a surprise. i would hope that it was communicated with other colleagues from central banks. i'm not sure it was. and i'm going to reserve judgment on the pert nence of that move because we have not discussed it with governor jordan and i would certainly want to understand where he's come from. i think i understand why he's doing it, but talking about it would be good. >> it begs the question, when you open up the imf's web page
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it says that one of the things that you are responsible for is global exchange rate stability. were you contacted about this? did the imf know this action was going to happen? >> governor jordan did not contact me, which doesn't mean to say he has not contacted somebody else in the organization. i find it a bit surprising that he did not contact me, but, you know, we'll check on that. by the way the imf used to be the referee of any currency variation. that has changed over time. clearly with the floating rates that we're seeing in many, many advanced economies around the world. but still. >> understood. the question i think investors are asking this morning, does this per sage a time of greater global exchange rate and monetary policy fluctuations throughout the world? >> you know, as the situation evolves and as we're seeing this what i call the synchronous
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monetary policy with the feds exiting and coming back to more traditional interest rate variations and as the ecb, the bank of japan, the bank of eng fwlap gland, are maintaining or entering the fray, we will see more volatility. there is no question about that. volatility of capital flows, volatility of exchange rate currencies, as we are seeing it now. >> are you concerned that currencies can be used as a weapon, as a primary means for countries to lift themselves up, that it becomes a war of currencies between countries here? >> you know, there was talk about a currency war back three years ago. we are not hearings those words anymore, not that music, and i would certainly hope that we do not have currency wars and that countries and their central banks in particular refrain from competitive devaluation. >> i would like to drill down a little bit on your expectations for monetary policy in the key
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areas of the world. is it still your expectation, given what's happening with interest rates in the united states, what's happening with inflation and the decline in oil prices, does this still seem like the right move for the federal reserve to raise interest rates this year? >> that will be a judgment they will make. given the complexity of the indicators they have, on both the employment/unemployment account and on the inflation expectations, nominal core expected, i think that they will do a fine job at really looking into all of those and making the right decision at the right time. >> is that still your expectation? >> yes. >> it would be a year of raising rates. >> yes. >> let's talk about europe. >> i'm saying that because the u.s. economy is clearly doing well and is currently a big engine for growth, you know, whether you look at growth, whether you look at employment indicators, whether you look at the housing sector, whether you
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look at the banking structuring that has taken place, a lot of very, very positive signals and we believe that 2015 will be a good year for the u.s. economy. >> i'm guessing that's the only thing you -- only country you can say is going to be a good year for. the world economic outlook is coming out next week. tells us what your outlook is for europe? >> still -- >> long sigh. >> well, i will make an exception. certainly the uk is, you know, confirming and strengthening its recovery. but if we look at the euro area it is still low, fragile and needs to be much stronger cohesive, more balanced and structural reforms are going to be absolutely needed strongly. >> this is the first time we've had a chance to talk tu since a couple days ago, european judge court advocate said it was okay for the europeans to buy
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sovereign bonds. what is your reaction to that ruling? >> i'm a former lawyer, so i'm waiting for the final decision by the european court, european court of justice, but the advocate general is a strong indication of where the court is likely to go. i would suspect it gives great comfort to mario draghi and his colleagues when they look at potential additional measures in terms of quantitative easing. it sets a bit of a framework. >> those are measures that i believe the imf has publicly supported, the idea of additional sovereign bond purchases. >> yes, we have. >> let's stick with europe for one more issue. do you have concern that greece could end up leaving the european union as a result of elections scheduled the end of this month? >> my sense is that once the elections are done and as soon as a government is in place, whether it's coalition or not, negotiations will begin to address the economic situation of greece, not to address the exit of greece.
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and that's all the signals that we're receiving. >> is that an area of concern for you? what would be the economic implications of greece leaving the eurozone? >> you know, it's just not possible under the current scheme and under the current, you know, articles of the treaty of the euro, if you will, so i don't see that happening. >> couple more areas i want to cover. low oil prices, we have the 10-year u.s. treasury today below 1.8%, at least it was for a while. is there a massive deflationary signal that's coming out of markets right now that is cause for concern at the imf? >> deflation is a cause for concern and we have warned again that risk of very low and sustainably low inflation in many of the advanced economies for at least a year, we are clearly seeing it accentuated by the decline of the price of oil.
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and there are as a result currency adjustments resulting from that. it's also a question of output. the capacities of some of the advanced economies are still, you know, not used to full potential and it to full effect which is why we have the stickiness of prices. >> but on net you still see low oil prices as a benefit for the global economy? >> we still say that it's a net positive. but what we are seeing as well is a great variety across the map, whether you're oil producers, oil exporter, oil importer, currency is pegged to the dollar or not, edged against the currency risk, puts you in a completely different situation. but all in all still seeing on a net basis a positive outcome from the decline of oil prices. >> if you don't mind madam lagarde i would like to pivot as a french woman, as a world leader, your reaction to the tragic events in paris the last couple weeks? >> well, i was like all my --
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like all my compatriots and like all people of goodwill, i was devastated and horrified and i was very strongly encouraged by what happened on sunday and this show of strong solidarity across the world to defeat the -- these evil forces. >> is there more that can be done on a global basis, do you think, to react to these issues that are out there? >> i would certainly myself advocate for very, very strong and sustained multilateralism and, you know, coalition of all those who see tolerance, respect, as a key value going forward. in that varnin, i hope the i inf can be reformed to represent the world and the united states -- >> you did have support from the united states today. >> yes. >> are you afraid it could
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backlash in the united states with the words you had to say in your speech earlier, excore rating the united states for not approving those reforms. >> but you know, i desperately want the united states to honor its commitment and ratify the reforms so that there is more financial means available to rescue the world, to support ukraine, to help those countries facing difficulties and the imf must represent the world. the u.s. will continue to have veto rights, will continue to be a strong main shareholder, the first one, but it has to ratify that reform and i hope it does. i really do. >> thank you very much for your time today. >> thank you. >> melissa, back to you. >> thank you so much, steve liesman. speaking exclusively with imf chief christine lagarde. lots out of that interview in terms of the reaction to the surprising move out of the swiss national bank sounded like christine lagarde was slapping the wrist of governor jordan for not giving her a head's up or the imf about this move.
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that was interesting. she almost did not hold back in terms of criticizing that move. >> the lack of communication, you could clearly see there was a bit of anger i think, at least that was my interpretation, body language, of what she was talking about. what stuck out for me most was when she addressed the u.s. economy, however, and talked about how strong she felt that would be and that stood out. that was the biggest part of the interview. >> the u.s. economy is clearly doing well and is a big engine for growth at this point. at the same time she said, as pete mentioned, deflation is, in fact, a cause for concern in the eurozone. how do you trade that? does that mean the u.s. is the best trade? >> she highlighted what the investment strategy is for 2015 which is to be u.s. oriented for all the problems and dysfunction that we have in washington, d.c., we still subscribe to the all for one, one for all. that's europe's problem. they're not all for one, one for
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all, when push examines to shove and you saw that today by the actions of the swiss national bank. >> i want to bring in michele caruso-cabrera. what was your reaction, wide ranging interview. >> i want to know what she thought about greece and she doesn't think they're going to be talking about an exit. >> no exit not even on the table. i know the treaty says that they can't do that, but it's hard to believe that when push comes to shove it couldn't be achieved. but the fact that she doesn't believe it i think is significant, that they're going to be negotiating some kind of new bailout package. significant in terms of trading because we know that hedge funds that specialize in sovereigns and distressed sovereigns in particular have been tempted by the three-year yield of 12.5% that if you're willing to white knuckle this through the next several months where the debt could get softer perhaps, it looks pretty good when you can only get 1.5% out of portugal, right. greek debt did not move on this, but, you know, certainly there are a lot of people paying attention to it. >> stef? >> her comments about the u.s.
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were very consistent with what we've all been saying for a while. we are clearly the strongest nation at this point. but a lot of the valuation is already reflecting that we are in good shape. there's still value. i still want to be here but i think you can pick at other places that are cheaper and i think that you don't fight a global monetary central bank inflow and i think that's what you're getting and getting it in europe, getting it in japan, probably going to get more in china, and in india that was the biggest surprise to me overnight more than the swiss national bank that they lowered rates and they could do so because their inflation numbers are coming down because of energy prices. they import 80%. to me i think there are pockets internationally that i think you can still own. still want to own u.s. you want to own some pockets of where there's value there. >> i thinks the concern about the deflation is real and coming back once again. i disagree with the premise that low oil prices are a near term benefit because clearly the
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discourse in the high yield market suggests that it's not. i go back to what i said the other day. a lot of high yield companies over the past couple years to feed the shale wells, that have to continue to borrow and were able to do so, cheap financing to keep the wells going, now is the moment where they have to finally hedge and that means they have to sell against their production in the near term. that's a problem. long term could be great for the u.s. consumer but near term it's problematic. >> michele, thank you for joining us. coming up we will get market gow ru ed's reaction to the comments from christine lagarde and gold surging on the news that the national bank is lets it surge. we'll debate it. downgrading apple to the analyst making that call and find out if our traders agree. that's next on the half. g a bus, legalzoom has your back. over the last 10 years we've helped over one million business owners get started. visit us today for legal help you can count on,
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getting a boost today. com ex gold up 2.3%. the miner is where the action is today. a trade off the increase in gold. newmont mining up 8%. any buyers of the gold trade
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whether the metal? >> i did only because of the activity i've seen today. in baric buying the march 10 calls, 10,000 traded early in the session. it got me intrigued. why not. we're watching what's going on, know what's going on with the central banks. for those reasons and all the activity out there tells me somebody thinks it's going higher. it is higher, trading about 1050, 1060 n$1060 now 11s. >> you bought calls -- >> bought call options. by the way, the volume, the volatility is higher but it's small when you talk about $10 stock implied volatilities even though they move it's not significant quite honestly. i will say this, when you look at that stock, 24 million shares already, 17 million average, this is very, very accurate. >> we are at session lows. the nasdaq as we mentioned before, continuing the lead to the downside, down by 1.1%. interesting because we are seeing that bid for safety trade going on, not only gold trading higher sharply, we see the tlt that tracks the bond market
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hitting another high on the session. what do you make of this? >> u.s. 10-year right now is 1.765. it's indicative of the world reaching for what's the safest treasury the u.s. treasury. back to gold, for a trade, clearly coming into 2015 not very many were talking about gold as they had been in year's past. that's all anyone wanted to talk about was gold. the problem with it is make it a trade. make it not an investment. if the market goes down, gold has not proven to us over the last five or six years it can prove to be the diversification tool when markets riot. >> we have financials sitting at session lows as well and that is a pressure. we lost that leadership group this year. bank of america is now down about 4%. >> as it should be. >> as it should be. >> based on the results. >> absolutely. and you have this yield problem. and that is going to be a big, big headwind. >> the volatility problem because it's too much volatility. it's not the right kind of volatility and then the yield problem. >> when i looked at the quarter
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i think we were all expecting net interest margins not to be great. the yield curve was flattening. that was a known. to me what was surprising if you look across the boards the numbers were disappointing. as i mentioned before their capital levels were -- it was okay. citigroup much worse. jpmorgan was disappointing on capital. i think there's a lot of questions beyond nim for the big banks. you can be picky in this space. credit cards is where i have been. pete has been there as well. joe likes some of them as well. those are a play on the consumer and lower oil, interest rates, that's good for the consumer and the consumer facing financials. even they will have a struggle with rates where they are. >> another interesting thing in the markets, the russell 2,000 is down by 1.5%. we had a guest on before who manages a small cap portfolio, joe, in general, do you want to be in small caps in an environment like this sp. >> well, think back to last
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year, small caps gave back what was a strong 2013. given the orientation to the u.s. being the safest place to be, i would say on pullbacks where you believe the downside is buffered so to speak you can look at small caps. i don't think the downside is buffered. there's more room, more vulnerability so i step back on mostly every asset right now no as we sit at session lows, we have ed coming up, he will weigh in on christine lagarde's comments she was as surprised as everyone else about the swiss bank mob as well. what does it mean about the volatile trade this year. his thoughts on the market movements today. another big year ahead for tim cook and apple. at least one analyst does not think and downgraded the stock today. we'll find out why ahead on the half. in my world, wall isn't a street... return on investment isn't the only return i'm looking forward to. for some, every dollar is earned with sweat, sacrifice, courage. which is why usaa is honored to help our
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from a partner who knows how to make your enterprise more agile, borderless and secure. hp helps business move on all the possibilities of today. and stay ready for everything that is still to come. hello. we hope you join us at the top of the hour for the hour of power. investors piling into gold today. prices at four month highs on the back of the surprise currency move by the swiss central bank. is now the time to get back into the glittery stuff and if if so, how should you could it. a battle brewing between two titans of u.s. defense, boeing versus northrop grumman. billions at stake. and few travel rules for cuba going into effect tomorrow. what they mean for anyone who wants a cigar and sometimes as freud said a cigar is only a cigar. back to mels lisa on the
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halftime money report. the swiss national bank surprising investors scrapping its cap on the franc which has been a safe haven currency. the international monetary fund christine lagarde dropped her own bomb shell in an exclusive interview. take a listen. >> this was a bit of as surprise. i would hope that it was communicated with other colleagues from central banks. i'm not sure it was. and, you know, i'm going to reserve judgment on the pert nence of that move because we have not discussed it with governor jordan and i would certainly want to understand exactly where he's coming from. >> let's bring in wall street's ed yardeneny an independent investment strategy firm. always great to see you. miss lagarde was surprised, i'm sure there are many, many funds out there, hedge funds that were surprised, what sort of dislocations in the market do you think we will see unfold over the next couple weeks and months? >> i think that's why we're seeing volatility in the financial markets including the
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equity market because we keep having these extraordinary moves in the various areas that no one really quite knows how it plays out. the plunge in oil prices, the recent plunge in copper prices and now this move in the swiss franc, the fear is that there's some hedge funds or financial institutions on the wrong side of this thing that suddenly we'll hear about and what's creating some of the anxiety in the markets. >> you mentioned low commodity prices that there is a concern about dae flags. would you agree with her in that vain, what do you do? how does that impact your view of stocks? >> well, perversely i think central banks have actually been one of the sources of this deflation. i know that's not what we learn in school when central banks provide liquidity that's supposed to bring inflation back, but everybody is already choking on a tremendous amount of debt. in other words, that doesn't seem to be working on the demand
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side and all the suppliers in the commodity areas, borrowed a lot of money to expand capacity. excess supply relative to demand and saw it in iron ore this summer and oil over the past few months and now in copper. i think easy money i ropically has created some of this problem. >> hey, ed, it's joe. at the end of the month the federal reserve will meet and christine lagarde stolds us all central banks are to be coordinated and talk to each other, should we expect the federal reserve to pivot and make a dovish message to the markets? >> the fed and what the swiss central bank has demonstrated is the fed does believe in forward guidance, they believe in communicating. there was no forward guidance in switzerland today. look, the fed i think is -- it's either one and done or none and done. i don't think you're going to see the fed raise rates much, if at all this year and the doves
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will be very patient. >> ed, we have to leave it there. thank you so much for joining us. >> thank you. >> coming up, the analyst who downgraded apple defends his call. "halftime" will be right back.
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take a look at the s&p 500, sector heat map. watching financials in technology. pressure in the overall markets which are just off of session lows. the s&p 500 is down by.85%.
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the yield on the 10-year treasury is 1.77%. you got to wonder about jeffrey gundlock his prediction we test modern era low of 1.38% because right now it does not seem so crazy. i don't know, what do you think? why do you think the markets are selling off if. >> that's what it is. >> the tenure? >> i think so. you can understand why it's happening given the relative yields around the world, but on the other hand, you also have coupled with lower oil prices, it's just very worrisome in what's happening from the demand point of view. look, really, that presentation was not really that inspiring, not really confident building. maybe that's why we are selling off. >> apple is putting pressure on the nasdaq today. downgraded to neutral after product head winds are ahead. the analyst, the call of the day, great to have you with us.
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>> thank you, nice to be here. >> you say the risk-reward is sort of in the middle because based on yesterday's close, we are seeing potential to the upside and bullish case 2 2% or so, and downside 22 %. what could shift this to the bullish side? is it a bigger than expected capital return? what should we be looking for, especially as we expect earnings soon? >> absolutely. upside, if they are going to show this much more margin caption possible to that with the iphone6 cycle than people are expecting, and if that's sustainable, that could get the start to the upper end. iphone6 in general is higher margin product, and especially with the addition of 6 plus, it's a higher margin product. if they show better, then it's sustained and pushing to the upper end. keep in mind, iphone is such a big franchise for them, they these 40 to 50 million net new users to grow that franchise, and over time, that's going to get hard and harder to achieve.
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>> what is that margin number? i believe in your note you said you believe the iphone6 franchise could be 60% margin product? >> yeah, historically, the iphone models have been between 48 to 58%, and with iphone6 and 6 plus looking at the studies, seems to be 60% for that product. iphone, that gets diluted by 5c and 5s sales, but, clearly, there's potential to go to the upper end like in 2012 when the total gross margin was in the neighborhood of 45 to 48 %, and they could get to about 42 to 4 3% in the cycle. >> leaving it there, thank you for the time. appreciate it. the call of the day, apple is trading down by 2.7 %, and pete, heavy option markets set up ahead of earnings? >> people are just -- quite honestly, not as exciting as it has been in the past. it will accelerate as we get in front of earnings, but that makes a lot of good points, and
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one of them, which, by the way, he's been right for three years on the stock with the a buy going up and up and up, but the one concern i had for a long time is the watch, one the things in the note he talked about is their checks tell them that will be disappointing sales. >> yeah, coming up, a familiar face back on top of the portfolio leader board. that and final trades coming up next in the halftime report. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities.
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the am. new aleve pm the only one to combine a safe sleep aid plus the 12 hour strength of aleve. nothing like competing for a good cause. portfolios, top investor, and the 2014 winners have just been announced. jamie dimon, up over 18 %, winning 8 $85,000 for his charity, and heyman capital was second, and oscar schafer came in third. if you want to get in on this year's competition, it's not too late. you have until midnight tonight to sign up.
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go to portfolios with purpose.org to register and compete. it is a great cause. speaking of competition, let's check the leader board for the 20 15 portfolio. i feel like there should be a drum roll. joe is in the lead. volatility? >> sitting on the sidelines right now. sitting on the sidelines. >> volatility is a good call. >> that's a good call. i'll mention 2014, faster cures to celebrate the success, that's what i donated to, all else, did out and do it. >> all right. keep tuning in because these leads, they change all the time. you never know. follow the action as well at cnbc.com/pro. let's look at the retail movers because there's a lot today. best buy the worst s&p performer shares fall after company warned of the slump in the first half of the year. this had been a tremendous winner, so on this disappointment, what do you think? >> yeah, i mean, it's still up,
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like, 60% from last year. >> yeahings yeah. >> it's just, i understand why it's down because of the margin guidance. that was disappointing because that's -- we're all excited they will be cutting costs and margins will not be hit as much. that was the issue in my mind that was disappointing. i don't think there's a rush. >> yeah. target shares, higher after announcing its plans to exit canada. finally, going to get out of canadian business. >> yeah, i mean, not to -- you can talk specifically to target because of the comments on that, but the hypermarket trade, the costco, walmart, and target, and costco was downgraded, i disagree with that, but it's the beneficiary, stay with the big box retailers. they mark higher. >> the consumer is getting a benefit? going out to the targets, et cetera? >> yes, and going to places like that, ross stores, which i mentioned the other day. >> not just paying down credit card debt? >> i don't think they are either. i agree. they are shopping. i think that's going to show up as we go forward.
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u.s. comps, they raised them from 2 % to 3 %. target's doing the right thing on exiting the canada debacle. it's been like that since the beginning. new management stepped in, people question whether it was the right guy or not. things are going right for target. >> worth noting the dollar stores, all three companies said that holiday sales saw a meaningful pickup in dg. it harts today because they lose out on family dollar, the bid, but all gave good commentary about holiday sales being encouraging, and they are a beneficiary of lower oil prices. >> time for the final trade. what do you have? >> a dangerous one, going with intel, they have earnings coming up, like what they are doing, the pc front, sales over the holiday season was very solid. this stock goes higher. >> joe? >> i continue to focus on health care right now. that's the sector that i would be allocating most towards. hillrom, another great quarter, makes a five year high. stay with it.
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it goes higher. >> i like estee lauder, i think they will be able to do it. >> that's all for us. see you tonight at ak for "fast money," do not go anywhere because it's "power lunch." >> halftime's over, and the second half of the trading day begins now. melissa, thank you very much. welcome to "power lunch," the hills are alive with the sound of the jumping frank. a huge story today, moving currencies and markets all over the globe. what's the impact on the dollar, and u.s. stocks, we have the answers coming up. let's take a look at where the dow stands for you right now, shall we? with modest moves up for the dow, as you see there. s&p and the nasdaq and the russell there are the numbers for you. relatively calm by comparison with recent days. another huge move, target, closing up shop in canada, ey? first, let's get to sue at the

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